The need to control the design, deployment and use of APIs continues to grow exponentially. Beyond their obvious use cases as enablers of internal applications and external business integrations, APIs are also the enablers of cloud operating systems and the means by which containers and microservices communicate. Consequently, APIs need to be managed as strategic assets with the same rigor as are applications and, as such, will force IT vendors and end-user enterprises alike to reconsider their current integration strategies and technology toolkits and step up the due-diligence efforts needed of buy vs. build decisions for API management (APIM) capabilities. In this report, we examine the state of the APIM market and postulate on the potential acquisition targets and would-be buyers.

The accelerating trend toward containerized applications, microservices and emerging market opportunity presented by mobile application development, the Internet of Things (IoT) and big-data analytics will require all IT vendors, cloud service providers, SIs and enterprises to support APIM in some way. Indeed, at the very least, APIM is needed by such companies as a new and more efficient means for customers to consume and integrate with their offerings. Moreover, APIM services are unlikely to remain stand-alone offerings. Their feature set is too narrow. APIM capabilities are more valuable when part of (or integrated with) more comprehensive development and integration platforms – all factors that make APIM vendors viable and sought-after acquisition targets. An analysis of potential acquirers and available targets demonstrates that demand is likely to outpace current supply – conditions ripe for new market entrants.

Acquisition drivers

As APIs become valued by enterprises as products and strategic assets, rather than just bits of code, they will need to be managed with the same rigor that connectors are managed within enterprise application platforms and integration PaaS offerings, and as applications are managed within integrated development environments, service-oriented architecture (SOA) frameworks, application lifecycle management platforms, PaaS offerings and DevOps tools. Players in these sectors will respond to this new market opportunity (or competitive threats from ambitious rivals) by enabling their respective platforms to manage APIs as a unique class or library of code.

Consequently, APIM vendors have emerged to manage APIs as strategic assets via platforms that include tools to ensure consistent design quality and coding of APIs; tools to control the completeness of documentation that describes the installation and use of APIs; means to describe the terms and conditions under which APIs may and may not be used (e.g., an API contract); practices and technology to secure the publishing, consumption and use of APIs; controls to publish, subscribe, call, throttle (limit or restrict use) or shut down APIs when usage or risk thresholds are surpassed; means to track usage and enable payment (if fees are associated with API use); and analytics to learn from API publishing and subscription behaviors, as well as the data payloads that result from API use.

Recent M&A activity

While APIs play a vital role in nearly all IT systems, APIM platforms are not likely to remain independent, stand-alone environments. Rather, as noted, they are best when part of other broader integration and development environments. Since 2012, we have reported on the noteworthy developments and market trends of API technology and APIM providers that back up this claim. Market activity in the past year continues to demonstrate an affinity to enable or subsume APIM capabilities into broader, more comprehensive platforms. In such time:

  • Oracle acquired Apiary in January for the way the target caters to the design quality and productivity needs of API developers and a new breed of business technologist – the API product manager.
  • Google purchased Apigee in September 2016 for its platform, customer base and expertise, and to better compete with rival AWS.
  • Rogue Wave Software reached for Akana in November 2016 to fill a gap in its application development tools portfolio that required better means for integration (e.g., Akana's suite of APIM, API security, SOA governance, cloud integration and microservice integration offerings).
  • Red Hat bought 3scale in June 2016 to bolster the integration capabilities within its JBoss Middleware suite and OpenShift PaaS – the target's APIM platform includes capabilities for API access control and security; analytics and reporting; a development portal and documentation; and billing and payment management.
Potential targets

As noted, the current supply of potential APIM vendor targets is somewhat scarce.

  • DreamFactory (Campbell, CA) offers open source software that provides REST APIs for mobile, web and IoT applications. In December 2014, it raised $4m – total capital raised is estimated at $18.5m. New Enterprise Associates is among its investors.
  • Mashape's (San Francisco, CA) APIM offerings include Kong, an open source API gateway; a developer portal for API distribution and developer onboarding; and API analytics to monitor and measure performance and execution. The vendor has raised a total of $26.1m over four rounds. Its latest round was an $18m series B in March led by Andreessen Horowitz, with contributions from existing backers CRV and Index Ventures. Other investors include Ignition Partners, Stanford University, Innovation Endeavors, and a team of angels that includes Eric Schmidt (executive chairman, Alphabet) and Jeff Bezos (CEO, Amazon).
  • Nevatech (Atlanta, Georgia) provides its Sentinet APIM platform composed of an API catalog/repository, an API gateway and an internal developer portal. The Sentinet Administrative Console includes capabilities for registering, describing and virtualizing REST APIs, as well as REST-to-SOAP conversions. The company is private and self-funded.
  • Postman (San Francisco, CA) offers its Postman Chrome and Postman Mac applications. Each are API documentation and testing tools that can be downloaded and added to Chrome and Mac OS. The apps enable developers to run, test, document and share API requests and sets of requests called Collections. Postman Collections is the vendor's metadata format for documenting APIs, describing a group of requests and building API workflows. In October 2015, the firm raised a $7m series A round from Nexus Venture Partners, which also provided seed funding of $1m in May 2015.
  • Restlet (Paris, France) is positioning its platform as an API PaaS that enables the creation, hosting, management and usage of web APIs and their underlying data. Web APIs connect a new generation of websites accessible by any kind of machine. The vendor has also developed the Restlet Framework, an open source project created to help Java developers expose and consume RESTful web APIs. Restlet has raised $7.75m in five rounds from CapDecisif Management and Groupe Siparex.
  • Sensedia (Campinas, Brazil) is an SOA consultancy that offers an APIM suite composed of API Gateway, Developer Portal and API Analytics. Its consulting products include guidance in developing API strategy. The firm is private, and funding is undisclosed.
  • SmartBear Software (Somerville, MA) acquired the Swagger API open source project from Reverb Technologies in Q1 2015. The deal positioned the company among the two most widely adopted API initiatives – SoapUI and Swagger. In late 2015, SmartBear launched the Open API Initiative under the Linux Foundation and donated Swagger to the effort. Its SwaggerHub APIM offering brings together all of the Swagger tooling into a collaborative web application to manage API definitions throughout the API lifecycle. In May, SmartBear was acquired by private equity (PE) firm Francisco Partners for an estimated $490m, according to 451 Research's M&A KnowledgeBase.
  • Tyk (London, UK) is a commercialized offering of the Tyk open source API gateway. Its funding is unreported.
  • WaveMaker (Mountain View, CA) provides a rapid application development platform. Its API Success suite includes an API Sandbox to build and test applications, an API Promotion Platform to promote the use of APIs, and an API Gateway to manage the API services at runtime. WaveMaker is a portfolio company of Pramati Technologies.
  • WSO2 (Mountain View, CA) has developed open source APIM software capable of designing and publishing APIs; creating and managing a developer community; and securing and routing API traffic. The vendor leverages its Carbon SOA platform to secure, integrate and manage APIs. It also integrates with the WSO2 analytics platform, providing reports, alerts and insight into API behavior. In August 2015, WSO2 raised $20m in funding led by Pacific Controls, with participation from Toba Capital. In February 2013, it raised $10m from Toba Capital, Cisco and Intel Capital. In May 2011, it raised $6.5m led by Quest Software, with participation from Intel Capital.
Potential acquirers

We believe the following technology vendors, SIs and service providers have need for APIM technology as part of their product/service portfolios. Indeed, any number of PE firms that rival or share risk with those noted above can also reach for such players to include within or add value to their existing investment portfolios.

  • Accenture invested in Google's Apigee and also partners with it to offer APIM capabilities and services to its clients.
  • Alcatel-Lucent's open API platform, apiGrove, could be enhanced by the pickup of an established vendor.
  • BMC has extended its market footprint in application management, cloud lifecycle management and DevOps but currently lacks an APIM strategy or offering to complement these capabilities.
  • CenturyLink is making an aggressive push to become a global cloud service provider. An API platform could help onboard and consume its services.
  • Equinix provides network connectivity and cloud interconnection services – it partners with Google's Apigee for its APIM service. It may consider other complementary options.
  • Fujitsu is retraining its Japanese engineers as 'digital innovators' that are likely to need APIM to bring reality to its vision.
  • Huawei is considering investment in various cloud infrastructures, and APIM could be part of its middleware strategy going forward.
  • HPE's Systinet will likely need broader API functionality.
  • Infor's ION middleware could use APIM enhancement.
  • Informatica has the assets but has been slow to come to market with an APIM roadmap. An acquisition could bring on the talent and customer base that it needs to take a leadership role.
  • Mendix, an emerging application PaaS specialist, has a Connector Kit that could benefit from APIM capabilities.
  • NTT is repositioning in the global cloud market and could benefit from either developing its own APIM, as did AWS, or buying it like Google did.
  • OpenText has pulled together many of its technology purchases into a common platform. APIM would be a natural extension to assist in exposing and employing enterprise content and information.
  • Pivotal is a leading Cloud Foundry PaaS firm that relies on Google's Apigee for APIM. It could seek a platform of its own.
  • Rackspace's cloud services and cloud management offerings need API functionality similar to that of AWS's.
  • Salesforce's broad SaaS and cloud PaaS aspirations could be enhanced with APIM capabilities.
  • SAP has an OEM reseller agreement with Google's Apigee but might seek to expand its market footprint via technology development or an acquisition of its own.
  • Software AG's broad product portfolio could use an extension of its API development and management as part of its future product roadmap.
  • Talend could seek an API platform to compete with rivals TIBCO, MuleSoft and Dell's Boomi. Restlet seems to be a likely choice given that its chairman is a cofounder of Talend.
  • Verizon has made aggressive moves in the cloud, social media and IoT sectors, where APIM can play a vital role.
Outlook

The technology used to create APIM offerings is relatively modern and capable of adapting to include new capabilities. The market is poised to serve as critical enabling technology within next-generation cloud services, IT platforms and development frameworks. The next most likely evolution of the technology will be to develop and orchestrate microservices. Microservice architectures for container, application development and DevOps initiatives are becoming popular among IT organizations. New and reasonably priced means for microservices orchestration represents a considerable market opportunity for application development, PaaS, DevOps and, indeed, hybrid integration platform providers alike, making demand for such technology high and supply somewhat scarce – conditions ripe for new market entrants.
Carl Lehmann
Enterprise Architecture, Integration & Process Management

Carl leads 451 Research's coverage of integration and process management technologies in hybrid cloud architecture, as well as how hybrid IT affects business strategy and operations. The markets covered in his research include enterprise architecture management (EAM) tools, hybrid cloud integration technology (including iPaaS and API management) and business process management (BPM) software.


Jean Atelsek
Analyst, Digital Economics

Jean Atelsek is an analyst for 451 Research’s Digital Economics Unit, focusing on cloud pricing in the US and Europe.

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